SMALL UK firms are struggling to access new finance with credit approvals at their lowest level in over two years, according to new research.
The survey from the Federation of Small Businesses (FSB) showed that only 60 per cent of small firms that apply for credit are successful.
The quarterly figure is at its lowest level since the fourth quarter of 2015, and down considerably from the 74 per cent recorded in the second quarter of last year.
In addition, 40 per cent of smaller firms described the availability of new credit as ‘poor’, a two-year high.
The FSB surveyed 1,017 small businesses between 13 April and 27 April 2018.
“If the Bank of England holds fire on a rate rise today that will be welcome news for a lot of small firms,” said FSB national chairman Mike Cherry.
“While most are preparing for a rate increase this year, credit affordability did drop off following November’s move. Higher rates are one more cost to worry about.”
One in four small businesses said that credit is ‘affordable’, down from 30 per cent during the same period last year.
And 63 per cent of small firms successfully applying for credit are being offered interest rates of over four per cent.
Just 14 per cent of small firms are making credit applications this quarter, in-keeping with previous surveys. The vast majority (79 per cent) are applying for traditional bank loans or overdraft facilities.
“Small shops in London are already under significant pressure with the high cost of commercial space and business rates” said FSB London chair Sue Terpilowski.
“If mortgage costs increase, that means yet another squeeze on consumer spend and yet another obstacle to getting customers through the door.
“Yes, rates will rise at some stage. But it needs to be at a pace that small firms can afford.”
Read more: High street banks are failing SMEs, says FSB